International credit rating agencies Standard & Poor’s (S&P) and Fitch lowered Sri Lanka’s national credit rating, which temporarily suspended repayment of external debt amid the worst economic difficulties, to the level just before default.
According to Bloomberg News on the 13th (local time), S&P downgraded Sri Lanka’s national credit rating to “CC,” the third from the bottom, and presented the outlook as “negative.”
S&P said that if the principal and interest of external debt are not repaid on the 18th, the next interest payment date, it will lead to a default, and warned that in this situation, the credit rating will be lowered again to “selective default.”
He also said that the Sri Lankan authorities’ debt restructuring negotiations with the International Monetary Fund (IMF) are now in the beginning stage, and that it could take months to reach a deal due to political uncertainty.
Fitch also lowered Sri Lanka’s national credit rating to “C,” which is just above the default.
Fitch said the Sri Lankan government has begun the default process by temporarily suspending the external debt situation, adding that it will lower its credit rating to a “limited default” (RD) when the grace period ends without repaying interest.
Fitch also lowered its credit rating by two levels from “CCC” to “CCC” in December last year, saying concerns over Sri Lanka’s national bankruptcy are growing.
Moody’s, another rating agency, is giving Sri Lanka its fourth rating, Caa2.
Sri Lanka’s Ministry of Finance said earlier on the 12th that it will temporarily suspend repayment of external debt until negotiations with the IMF are completed and comprehensive debt restructuring is prepared.
